Department of Military Veterans on its Quarter 2 performance

08 March 2017

Chairperson: Mr M Motimele (ANC)

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Meeting Summary

The Department of Military Veterans (DMV) presented a combined report on the performance of the Department in the second and third quarter 2016. Throughout the presentation on the second quarter report, challenges were outlined and the third quarter report highlighted areas where there had been some improvement, although the DMV overall was still underspending significantly. 66% of the DMV budget, R333 million, is allocated to benefits, with a key component being socio-economic support, which includes expenditure on military healthcare, education, social relief of distress (SRD), housing, and military pension. DMV had largely underspent on the some important benefits such as healthcare, skills development and housing, and grossly overspent in areas of education support, by more than double the allocated budget, and in burial support. This was mainly attributed to the fact that staff and systems were not up to the standard to effectively spend the funds allocated to the various areas. The majority of the spending had been used to cover the costs of employment and developing administrative databases within the Department. Lack of capacity to spend remained a continuing challenge for the DMV. Social Relief of Distress payments were due to start in May 2016, to identified beneficiaries, but the actual payments only started in June. Again, institutional capacity was problematic. The overspending in education support was explained partially by the fact that the DMV had under-budgeted significantly, and some of the spending was still related to accruals from the previous year. In this year, 8 700 applications were processed, compared to the 5 300 from the previous year. By the end of the year it was expected that the spending would be double the budget. Overspending in burial support also happened because of accruals. It would usually take seven days for approved funding to be transferred. The main bottleneck was family disputes. Although there was significant under-expenditure in skills development, with only 7% of the allocated budget being spent, the DMV was taking significant steps to improve that. Some of the skills development funding had been moved to the education support budget. Payments for Compensation for Injury had been processed from quarter 3, to 190 applicants to date. The system to pay pensions had not been put in place and would be rolled over to the next financial year; the DMV would be asking for this allocation to be re-directed to fill the shortfall in education support. There were also huge backlogs in paying out healthcare, with only 10% spent of the budget. The major problem was that the SA Military Health Services, who provided the care, did not have an efficient system in place to invoice the DMV so that there was a huge backlog. It was expected that the spending would improve in the fourth quarter. DMV was trying to put a formal service level agreement in place with SAMHS to resolve the current bureaucratic processes. DMV admitted to “chronic underspending” on housing, with only 8% of budget spent by the end of the third quarter. DMV and Department of Human Settlements had set up a task team which was meeting weekly. 1 421 beneficiaries were identified as priority beneficiaries. The DMV concluded that much of the fourth quarter would be devoted to planning and implementing systems to deal with backlogs and bottlenecks.

Members highlighted the 35 vacancies and the lack of coherent policies for recruitment. They felt that the fact that two reports were presented simultaneously meant that there had not been proper monitoring or attention to actually addressing the challenges, and wondered if these figures were being taken into account in the adjustment budget. They asked about the status of the skills audit, and emphasised the importance of reliable and accurate data. Members asked if the education spending related to public or private education, wanted the criteria to be explained, and how these funds were distributed across the beneficiary spectrum. They also asked for details of related or associated burial expenses. They asked whether the systems and transfers of funds were consistent with the Public Finance Management Act. Members highlighted that housing was a very contentious issue, and questioned the targets since a total of 4 990 veterans had originally been identified, so that the most current figure of 1 421 must be explained. Members urged the DMV to be discreet and strategic in how they communicated the benefits. They queries the delays in implementing the transport policy. The Members also wanted more explanation on the underlying causes behind slow expenditure on healthcare.

Members finally approved the minutes of 2 February 2017.

Meeting report

Chairperson's opening remarks
The Chairperson, in welcoming delegates from the Department of Military Veterans and Department of Defence, noted that the key focus of the presentation should be to focus on its budget and expenditure, and progress made in providing housing, healthcare, education support and skills development for military veterans and their dependants.

Department of Military Veterans briefing on budget and expenditure
Mr Max Ozinsky, Acting Deputy Director General, Department of Military Veterans, informed the Committee that Dr Alex Mahapa, former Deputy Director General of the Department of Military Veterans (DMV or the Department) had resigned in December 2016. A submission had been to the executive authority to advertise this post.

Mr Ozinsky firstly referred Members to point two on the agenda which highlighted the report on the performance of the DMV for the second and third financial quarters (Q2 and Q3) of 2016. He requested permission from the Chairperson to amalgamate the two quarterly reports, particularly since the Department was already ending its fourth financial quarter. He added that the issues emerging from both quarters were similar. He would highlight the main issues and challenges of the earlier quarters now, would highlight them again in the fourth quarter and identify the progress and improvements that were made and the plans put in place to accelerate this improvement.

The Chairperson agreed that merging both presentations would aid the Committee in its understanding and appreciation of progress.

Mr Ozinsky then proceeded to present the financial executive summary. The 2016/17 overall budget of the DMV was R597 million. By the end of Q2 the DMV should have spent 50% of the budget and by the end of Q3 the DMV should have spent 75% of the budget.

66% of the budget was allocated to benefits, totalling R333 million. A key component of this is socio-economic support which includes expenditure on military healthcare, education, social relief of distress (SRD), housing, and military pension. The total spending to date was R262 million.

A second key area of the budget allocation is classified as Empowerment and Stakeholder Management (ESM), and this deals with skills development, business empowerment and veteran counsel, for which R71 million was allocated. On this, DMV should have spent 50% of the budget, yet had spent only 25% by end September. The largest portion of this spending had gone to costs of employment and administrative / organisational development. The DMV had under-spent severely on benefits. The key challenge in this regard was the lack of capacity to effectively spend the funds to their allocated areas, and to roll out the benefits efficiently to beneficiaries. This was not a new, but a recurring challenge for the Department.

In respect of Social Relief for Distress (SRD), he noted that payment of SRD was supposed to start in May 2016 to identified beneficiaries. However, payments to recipients only began in June 2016 but were back-dated to May. The payment of these funds had been in-sourced and they now came directly from the Department. Institutional capacity does not fully equate with demand, but the Department is managing the process and making progress in this area.

In respect of Education Support, Mr Ozinsky reported that by the end of September 2016, the DMV had over-spent. However, he wanted to explain that in the previous financial year, the DMV had under-budgeted severely on this item. Therefore, in 2016/17, the DMV took a decision to budget R26.4 million for education support, and the DMV still had accruals from the previous financial year. In addition, there had been a 50% increase in expenditure on education support. In the previous financial year, 5 300 applications were processed. In the current financial year, 8 700 applications had been processed. He noted that the DMV expected, by the end of the financial year, to have spent R140 million on education support, which was effectively more than double what had been budgeted for.

In the area of Empowerment and Stakeholder Management (ESM), specifically burial support and skills development, the DMV had also over-spent. The overspending on burial support was mainly attributed to accruals and retrospective burial support of deceased military veterans. There was currently a system in place to make burial support available to the bereaved family. It was noted that if the deceased qualifies for the support and if all paperwork is resolved, it takes seven days for the funds to be transmitted (via EFT) to the undertakers or relevant family member. Family disputes were highlighted as the main bottleneck in this process.

By the end of September there was also significant under-expenditure in skills development, with only 7% of the allocated budget being spent. However, the DMV has taken significant steps to accelerate the delivery of skills development to military veterans and their dependants. Some money has also been taken from the skills development budget and reallocated to education support.

Mr Ozinsky said that payments for Compensation for Injury (COI), which was introduced at the beginning of the financial year, had only been processed from Q3 onwards. An efficient process has been put in place to assess eligibility for COI. 190 applicants have been paid, and more are being assessed to date.

A system to pay out pensions has not been set in place, and by default this must be rolled over to the new financial year. The DMV will be setting up a meeting with National Treasury (NT) to reallocate these funds to education support. He stressed that this meant that the funding would still be used to grant benefits overall, although it would not be not be used to pay out pensions.

The issue of military healthcare was emphasised by Mr Ozinsky. He noted that by end of September 2016 the DMV had only spent 10% of the allocated budget on healthcare. Military healthcare is currently provided by the South African Military Health Service (SAMHS). The key challenge of SAMHS is that it does not have an efficient system in place to invoice the DMV on healthcare provided to military veterans. There is currently a huge backlog in invoices received from SAMHS which inhibits DMV from effectively spending the funds allocated specifically to healthcare.

Although DMV has put systems in place to speed up the process of paying for the invoices received from SAMHS, in an attempt to rectify the spending position, the point was that it could still only process and approve payments when SAMHS invoiced the DMV. Much improvement was needed in SAMHS. He added that in Q4 of 2016, as well as the new financial year, expenditure on healthcare is expected to increase as the DMV will then expected to process all outstanding invoices received from SAMHS and deal with other accruals incurred from the previous and current financial year.

He noted that the DMV does not have a Memorandum of Understanding (MoU) or any form of service-level agreement (SLA) with SAMHS, similar to the ones that existed with the Department of Defence (DOD). The DOD has quite a complex bureaucratic process which, in theory, SAMHS should follow when issuing their invoices to the DMV. The solution to this issue, which the DMV is currently working on, is to put a formal service-level agreement into place between between DMV and SAMHS, in an attempt to resolve and do away with the current complex bureaucratic process. The SLA will also iterate the DMV’s expectations on the standard of healthcare to be provided.

Mr Ozinsky spoke to the housing for Military Veterans. He admitted that in this budget there had also been “chronic underspending”. By the end of Q3, the DMV had only spent 8% of the allocated budget. A task team had been set up, with the Department of Human Settlements (DHS), to deal with the housing targets, and this team now was meeting on a weekly basis. The DHS has highlighted a total of 1 421 veterans as beneficiaries for houses. The initial roll-out is meant to provide RDP houses and thereafter upgrade them to military-veteran specifications, but the DMV and DHS are still in negotiation on this issue. Both have a defined commitment to provide these 1 421 houses. He added that there is significant commitment at the political and senior management level in DHS to resolve the issue of housing delivery to military veterans.

Mr Ozinsky concluded that by the end of December 2016 the Department had been facing severe challenges with under-performance and underspending. Most of the fourth quarter and new financial year will be dedicated to putting plans in place to address issues of backlog, bottlenecks and non-delivery of critical benefits to military veterans. The DMV will also be setting new targets for further improvements to areas that are working efficiently.

He referred to page 15 of the Q2 Performance Preliminary Report which detailed the targets that were set at the beginning of the year, and what was achieved towards the end of the third quarter. Reference was also made to the Q3 Report, where both the improvements and the continuing challenges were highlighted.

He summarised that in this quarter, expenditure on Social Relief of Distress increased so that up to 84% of the budget was spent. Education support also saw a dramatic increase by R44 million (double what the DMV had budgeted for. In respect of health and wellness, the Department was still lagging behind. On the issue of skills development there had been an incremental increase but the Department was still not where it would wish to be. In relation to burial support there was also over-expenditure towards the end of the Q3.

Discussion
The Chairperson stated that he hoped the presentation clearly explained the state of the DMV at the end of Q3. He asked that Members of the Committee having observed the Q2 report, comment on areas that they would like to see improved. He requested Members of the Committee for their questions and comments.

Ms B Dambuza (ANC) stated that the two quarterly reports gave a clear indication of the state of the DMV and of its key achievements. She outlined some of her main concerns. Page 25 of the Q2 report detailed 35 vacant posts at the DMV and highlighted that there is not a coherent policy which outlines the recruitment and selection process at the DMV. She was worried to read this and wanted to know what exactly will be the process of filling these posts, and what is the timeframe by when the DMV should have drafted a coherent policy that will govern how it would recruit and select candidates for vacant posts. She also mentioned that timeframes and deadlines should be reported on retrospectively, and not prospectively.

Mr S Esau (DA) was concerned with the timing around the presentation of these reports. The fact that two reports are being presented at the same time raises issues about the consistency of monitoring loopholes and recurring challenges, and how the DMV would identify improvements to be made. He also noted that a quarterly report is meant to be presented upon conclusion of that quarter and he emphasised the importance of complying with these time frames, as this was the reason why a quarterly dashboard was instituted in the first place. If compliance with the relevant times frames are not met, then he said that these reports would become “obsolete” and “irrelevant” to the Committee's work, which was to monitor and oversee Executive Departments. He asked whether the findings in this report would be incorporated into the Budgetary Review and Recommendation Report and if the points made had been taken into consideration in the adjusted budget of the DMV, particularly in relation to the under-spending on skills development and housing, and over-spending on burial and educational support.

Mr Esau added that capacity of staff has been highlighted as a high risk for several years and it still appears to be one of the high risk areas in the DMV. He wanted to know what was the status of the skills audit carried out by the DMV, what interventions had been put in place and whether the staff had become more effective in fulfilling their tasks. He pointed out that access to reliable and accurate data is essential to the work the DMV is doing. He further highlighted the two areas where gross over-expenditure took place, and pointed out that there were other areas that had not been mentioned. He therefore asked how much was being spent on private education for the dependants of veterans (which is costing the DMV millions, and also depriving the dependence of other veterans). He wanted the criteria for accessing education support to be clearly clarified. He asked for an indication of what measures are in place to ensure that all military veterans’ dependants can benefit from this budgetary allocation.

Secondly, he expressed gratitude for those matters where the DMV was assisting, namely the burial costs of veterans and ensuring that the family/undertakers receives the allocation of R30 000. However, the concern was how much was also being spent on the related or associated expenses for the individual burials, which might include transport, memorialisation and other expenses. These limited resources and funds needed to be equally distributed to all beneficiaries across the system.

Mr Esau continued on the issue of veteran pensions. This had been a very contentious issue within the DMV. The communication and marketing strategy of the DMV had sparked several queries over the years as to when these pensions will be paid out, mainly because National Treasury has not approved and set aside the funds for the benefit to be paid. Mr Esau encouraged DMV officials to be discreet and strategic in how they communicate the payment of benefits as this can be a huge challenge for Committee members dealing with queries. He also highlighted the delay in implementing the transport subsidy due to veterans, and queried the status of this policy.

On the issue of housing, Mr Esau wanted to know what were the criteria for accessing housing. Noting that 1 421 applications were lodged, he asked who these candidate were and whether there is a subsidy that veterans can access. He also wanted to know the locations of where the houses are to be built, and questioned whether the 1 421 beneficiaries had been notified, whether they were part of a beneficiary list and whether the relevant provincial and local administrations had been informed about these developments. In relation to the military pension and other employee benefits, Mr Esau wanted to know what were the measures the Department of Defence (DOD) has set in place to alleviate the spill-over of SANDF employees to DMV. On the issue of healthcare, Mr Esau welcomed the proposal for a SLA between DMV and SAMHS. However, he did stress that SAMHS establishments are highly under-funded, understaffed and ill-capacitated. Based on this, he wanted to know what were the processes that the DOD had put in place to rectify these challenges and address the layers of bureaucracy in relation to the invoicing.

Mr S Marais (DA) echoed the concerns of Mr Esau and highlighted the chronic under-spending on veteran pensions, healthcare, housing and skills development. These socio-economic benefits are crucial to the well-being of veterans and their families and providing them was the main task of the DMV and the very reason why this executive and department was established. He commended the administrative milestones achieved by the DMV, which were important, but felt nonetheless that less funds should be spent on bureaucracy and the payments of salaries, and more funding and focus directed to improving the lives of veterans. If they saw no impact on their lives from the efforts of the DMV, then the DMV had no purpose and its efforts were futile. Mr Marais also paid attention to the issue of overspending, asking who approved over-expenditure and transfers from one budget allocation to the other. He was raising this issue because the financial practices of the DMV were not in line with the Public Finance Management Act (PFMA).

Ms N Mnisi (ANC) welcomed the detailed presentation. She asked if the delegation could isolate what were in fact the underlying causes behind the “slow” expenditure on healthcare, commenting that attributing this to layers of bureaucratic process was not sufficient explanation. She was also concerned about the numbers of beneficiaries designated to receive houses, and queried why the DMV was citing a figure of 4 990 pre-approved, whereas the DHS was citing only 1 421.

Mr Ozinsky stated that it was in the hands of the Parliamentary committees to ensure that dates on which departments were asked to appear were consistent with the quarterly dashboard. It was not the Department, but Parliament, who set the dates for presentation of reports. At the end of each quarter the reports were in any event prepared because the DMV also had to submit such reports to the Department of Planning, Performance Monitoring and Evaluation (DPME) and National Treasury.

He noted that all funds transferred to the education support component were accounted for, and there is no record of irregular spending. There was still R53 million in this fund, but because applications are coming in as the new academic year commences, these funds were expected to be fully used by the end of the fourth quarter. The information database of the DMV is also undergoing improvement, in partnership with Sector Education and Training Authority (SETA) and it is now being regulated by a set of standardised operating procedures, to ensure the capturing of accurate and reliable data.

Mr Ozinsky explained that there were two sets of numbers for housing applications. The figure of 4 990 constitutes the overall list of veterans whom the DMV had identified for housing provision. The figure of 1 421 were those whom the DMV had identified for prioritisation. The initial priority target was 1 000, and the DMV had reached and exceeded that. This benefit constitutes a reparation measure for soldiers who formed part of the non-statutory forces under the previous dispensation, predominantly the liberation army forces. These veterans were trained in exile, subjugated and discriminated against, and most of them did not have access to the most basic socio-economic resources under the 1994 regime. Soldiers who served in the statutory forces did at least have access to housing subsidies, medical insurance and pensions under the former regime. Mr Ozinsky highlighted the controversy over a development currently taking place in the suburb of Blue Downs in the Western Cape, which was skewed towards former statutory members, with only two out of 60 former non-statutory soldiers having been allocated housing. He asked the Committee to understand the basis behind this provision, which was to address the injustices of our past and pay tribute to those that sacrificed their lives and freedom for the sake of the current democracy.

Mr Ozinsky said that some of the key challenges that the DMV is currently facing arose because of the rapid break between the DOD and DMV. The DOD is reported to have robust systems in place when responding to and developing policy issues, such as HR, budgeting and service delivery. Previously, the DMV was a unit under the umbrella of the DOD, and its breakaway came with much learning, some of it achieved through trial and error. There was progress on vacancies, as advertisements had been placed in national newspapers and posts – most of which would be in areas of service delivery - were being filled. Mr Ozinsky assured the Committee that he would keep Members up to date on the approval of organisational restructuring, and asked that they recognise the lengthy appointment process for public officials. In order to fill the post dealing with the database, a lateral transfer will be taking place, on approval from the executive authority, because this candidate was deemed, after a thorough review of all the applications, to be the most skilled and qualified person for the position.

Mr Marais returned to the question of former statutory and non-statutory members, and emphasised that the Committee 's concerns about underspending on housing were not directed to one group of veterans or another. The duty of the DMV is to see to the needs and well-being of all veterans, and not to favour one group over another in providing pension, housing and healthcare. The issue is not who received the benefit, but the fact that there had been chronic underspending of the budget.

The Chairperson agreed this Committee does not favour one group of veterans over the other. He reiterated Mr Marais’ point that this Committee maintained that “a military veteran remains a military veteran” and “a soldier remains a soldier”, although he did take the point that Mr Ozinsky had been speaking to the historical realities.

Mr Ozinsky explained that he was not intending to imply anything but merely to create awareness in the Committee about the policy commitments of housing provision within the DMV.

Ms Nontobeko Mafu, Deputy Director General: Empowerment and Stakeholder Management, DMV, responded to questions about burial support. The total payable to eligible candidates would be R25 000 but for memorialisation and honouring there is a cap of R20 000.Specific costs do vary because the more senior members of the statutory and non-statutory armed forces will, by default, be allocated more. As far as possible, the Department encourages the bereaved family to make use of DMV buses.

She noted that the executive authority had authorised the DMV to fund only public education and not private education, at both basic and tertiary level education. For basic education, the cap is at R42 000, for vocational skills (TVET colleges) the cap is R40 000, and for tertiary education it is R72 000.

Mr Ozinsky added this remains the most contentious issue with stakeholders and he appealed to Committee members to consult with their constituencies to resolve this matter. He also said that exceptions to the capping could be made where the veteran or the dependent wants to study medicine, which is relatively more expensive than other degrees, or gain special skills such as a pilot's licence. There are other specifics. For instance, one application currently being processed related to a military veteran who is a non-South African citizen and resides in a neighbouring country; as an SADC citizen the costs for study will be slightly higher. These may be accommodated by the DMV, but such applications are dealt with on a case-by-case basis, approved by the executive authority. No other considerations can be made over and above these categories.

The Chairperson thanked the delegation,and stressed that it was important to remain committed to receiving the quarterly reports to ensure consistent communication.

Adoption of Minutes
Members adopted the Committee minutes of 02 February 2017.